7 Essential Things You Must Know Before Getting a Credit Card

Credit cards can be powerful financial tools, offering short-term financing, expediting payment processes, and even granting rewards. However, if not managed carefully, credit cards can cripple your finances. In this article, we will share with you seven things you must know before getting a credit card.

Credit Limit

The maximum sum of money you are permitted to spend with your card by the bank or credit card company is known as your credit limit.

 The limit varies depending on your creditworthiness. If this is your first credit card, your credit limit probably won't be very high. 

So, don't expect to get a high credit limit of $50,000 on your first credit card if the issuer cannot track your credit history.

Secured vs. Unsecured Credit Cards

A secured credit card is an alternative if you're new to using credit cards and are having trouble being approved because of your short credit history.

 A secured card requires a deposit that acts as a safety net for the issuer if you fail to make good on the amount you owe. After multiple successful transactions and repayments, the issuer can grant you an unsecured credit card and refund your initial deposit.

Sign-Up Incentives

Credit card issuers often offer incentives to lure you into opening a credit card account with them. These incentives can include granting you a particular sum of travel miles or an initial lump sum. Before accepting such an offer, make sure to read the fine print, as many of these incentives come with clauses.

Credit Card Rewards

Credit card issuers commonly offer rewards when you use their card to make purchases. Before getting a credit card, consider which rewards are most useful to you. These rewards can range from cash back to airline miles and more.

Possibility of Being Denied

Being a first-time applicant for a credit card does not guarantee that you will be granted one. Your application review process will take some time, and you could even get denied. This boils down to your non-existent credit history and how it would be a risk on the issuer's part to grant you credit.

Minimum Payment

Your minimum payment due is the lowest amount you must pay without being charged a late fee. This sum usually ranges between one and three percent of your total balance. While a minimum payment will help you save your credit history, the remaining balance will be carried over to the following month, so it's best to pay the outstanding balance as soon as possible.

Consequences of Not Paying on Time

Not paying your credit on time comes with several consequences that can cause inconvenience down the line. For example, you may have to pay extra interest for delayed payments, and your creditworthiness decreases, making it difficult to access further credit or a higher credit amount.

Conclusion:

Before getting a credit card, it is essential to understand these seven things to ensure that you don't end up crippling your finances. A credit card can be a powerful tool, but only if managed responsibly. Make sure to do your research, read the fine print, and understand what you are getting yourself into before applying for a credit card.